Information Uncertainty

Maarten Janssen; Santanu Roy

Information Uncertainty

Maarten Janssen
, Santanu Roy

Department of Economics

Publications: Working paper

Abstract

In a market where buyers and sellers are uncertain about whether
others are informed about the quality of an asset, inefficiency in trading
arises due to incomplete learning. An uninformed seller will want to
learn the asset's quality from the buyers'bids and may be willing to sell
at low, but not at intermediate bids. Buyers may have incentives to pool
their bids to prevent this type of learning. We outline conditions under
which potential gains from trade cannot be realized in states where all
traders are symmetrically informed or symmetrically uninformed.

Original language	English
Publisher	CEPR Press (Centre for Economic Policy Research)
Number of pages	29
Publication status	Published - Aug 2023

Publication series

Series	Discussion Paper / Centre for Economic Policy Research
Number	18391

Austrian Fields of Science 2012

502053 Economics

Cite this

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AB - In a market where buyers and sellers are uncertain about whether others are informed about the quality of an asset, inefficiency in trading arises due to incomplete learning. An uninformed seller will want to learn the asset's quality from the buyers'bids and may be willing to sell at low, but not at intermediate bids. Buyers may have incentives to pool their bids to prevent this type of learning. We outline conditions under which potential gains from trade cannot be realized in states where all traders are symmetrically informed or symmetrically uninformed.

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M3 - Working paper

T3 - Discussion Paper / Centre for Economic Policy Research

BT - Information Uncertainty

PB - CEPR Press (Centre for Economic Policy Research)

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Information Uncertainty

Abstract

Publication series

Austrian Fields of Science 2012

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